The Reality of China’s Billions in Solar Loans

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

"Capital flows for cleantech in China are not well understood," said Dan Reicher of Stanford University in an interview we will publish later this week.

But is that really true?

A few weeks ago, I published a chart that sought to put the magnitude of the Solyndra loan money into perspective. Based on that chart, it would appear that China is providing tens of billions of dollars in low-cost loans to Chinese solar companies. The table that follows (from Mercom Capital) would seem to confirm this.

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Chart by Ryan Cunningham using Reuters and Bloomberg sources

Mercom Capital asserts that the loans to solar companies total over $40 billion over the last two years.

Reuters, Bloomberg, and Mercom would seem like reliable outlets.

But according to Suntech and other sources in the know -- they are flat-out wrong.

And those sources might want to read PVNews for a little more accuracy in their solar news. Here's the PVNews take on Chinese bank debt:

According to a spokesperson from Suntech, of the total $7 billion China Development Bank credit facility received by Suntech, less than 10 percent was actually drawn down. According to Suntech, "In addition, last year, Suntech paid an average of 4 percent to 5 percent interest on our loans, much higher than the 1 percent given to U.S. companies under the DOE loan guarantee program. As most of our loans are at variable rates, this year we are paying closer to 6 percent as China has raised interest rates to combat inflation. The China Development Bank made higher profits last year than Morgan Stanley and you don’t do that by giving away free money."

Here is an image from Suntech's form 20F (annual and transition report of foreign private issuers) that cites the interest rates of the loans from the Bank of China at between 4.8 and 5.4 percent.

A U.S.-based senior executive at a global solar company with operations in China told Greentech Media that "any chart suggesting that Chinese banks have actually lent “tens of billions” is not accurate. They have offered to lend, but much, much less of this money has actually been lent since the companies first have to go through a rigorous lending approval cycle. Just look at their balance sheets to see how much is really being lent."